Blu-ray is "a bag of hurt"

At the October 14th 2008 Apple Notebook event a question was asked why the new MacBooks didn't have HDMI or Blu-ray. The answer was "HDMI is limited in resolution and can’t drive our 30-inch display so we put in Display Port."

Then Steve Jobs added:

“Blu-ray is a bag of hurt. I don’t mean from the consumer point of view. It’s great to watch movies, but the licensing of the tech is so complex. We’re waiting until things settle down, and waiting until Blu-ray takes off in the marketplace before we burden our customers with the cost of licensing. It's a nascent market that's just getting started. We'll see how it goes."

Bag of hurt? Ohh how I feel the pain. So is it licensing, cost, or something else?

Licensing
Apple currently licenses MPEG-2 video and Dolby AC3 audio technology for their DVD products. iTunes uses the MPEG-4 video codec and DRM. AppleTV has an HDMI port. Any hardware patents for the physical laser / disc transport would be taken care of by the drive manufacturer. So the only parts missing for a minimal Blu-ray implementation are the VC-1 video codec and BD-Java. Apple is also a member of the Blu-ray alliance whose sole purpose is to share technology and ease licensing problems. I don't see how licensing is an issue.

Cost
The current cost of Blu-ray drives are around $100 for a reader and $300 for a burner. These costs will go down over time but both Sony and Lenovo are currently shipping notebooks at MacBook prices so cost isn't the only issue. Performance also isn't an issue since a Sony VAIO with a 2.0 GHz Intel Core 2 Duo T5800 Processor can handle playing Blu-ray video.

Something Else
Blu-ray would compete with Apple's iTunes video download business and it would make the current AppleTV obsolete. Apple and several other "experts" have claimed that the HD future is video downloading. High rental costs, limited movie selection, low quality (720p and low bitrates), and broadband provider bandwidth caps are all going to be major obstacles for consumer adoption. Another problem is that the video download market space is crowded with many players (Netflix, Sony, Hulu, Amazon, Vudu, iTunes, all the cable company VOD offerings). As a consumer, that is just too many boxes to have in my living room. I want one box and I think alliances are key here.

LG just came out with a Blu-ray player that supports Netflix streaming. Tivo supports Amazon downloads and there is talk about future Netflix and Hulu support. Sony has its Bravia-link streaming service and I wouldn't be surprised to see Sony's PS3 and BD-Live compatible players get a firmware upgrade supporting it.

The only solution that can currently support Netflix, Hulu, and iTunes is the Home Theater PC (HTPC) but I'm not sure I want one in my living room. Microsoft's Vista Media Center can do all this plus browse the web, play Blu-rays, do DLNA, and be a networked DVR. Has the battle for the living room just begun? Or is it already over?